Earlier articles:
Readers may refer to earlier articles about press release in view of COVID19 in which preamble and basics are discussed. Those articles were on Income-tax , GST and Financial Services. Hence these are not repeated in this article. In this scope of write-up is kept restricted to matters in relation to remedial or relief measures announced in relation to compliances and regularization of some of corporate compliances and proceedings.
From Press Release Posted On: 24 MAR 2020 5:10 PM by PIB Delhi and observations are given in tabular form:
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From press release with highlights added:
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Observations
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Corporate Affairs:
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- No additional fees shall be charged for late filing during a moratorium period from 01st April to 30th September 2020, in respect of any document, return, statement etc., required to be filed in the MCA-21 Registry, irrespective of its due date, which will not only reduce the compliance burden, including financial burden of companies/ LLPs at large, but also enable long-standing non-compliant companies/ LLPs to make a ‘fresh start’;
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Filing and compliances could be made eligible from the date of Press Release instead on 01042020. Given situation, one can while working at homes, for already delayed matters, one can prepare documents and make compliance on or after 1st April because if complied up to 310320 additional fees will be applicable.
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- The mandatory requirement of holding meetings of the Board of the companies within prescribed interval provided in the Companies Act (120 days), 2013, shall be extended by a period of 60 days till next two quarters i.e., till 30th September;
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This extension was not necessary, instead of simplicity of holding meeting by tele-conference ,recording and circulating the same can be made popular to avoid travels.
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- Applicability of Companies (Auditor’s Report) Order, 2020 shall be made applicable from the financial year 2020-2021 instead of from 2019-2020 notified earlier. This will significantly ease the burden on companies & their auditors for the year 2019-20.
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Der aaye durast aaye. Applicability from FY 2019-20 was unreasonable because of delayed CARO 2020 requiring detailed discussions and clarification and preparation to make compliances for reporting.
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- As per Schedule 4 to the Companies Act, 2013, Independent Directors are required to hold at least one meeting without the attendance of Non-independent directors and members of management. For the year 2019-20, if the IDs of a company have not been able to hold even one meeting, the same shall not be viewed as a violation.
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In opinion of author, in reality, and generally independent Director is a misnomer and wrong concept. When any person becomes independent director for fees, perks, name and fame etc. it is difficult for him to remain independent. Furthermore, as per provisions of Schedule 4 itself, expecting any director to be independent is a non-achievable target in most of cases.
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- Requirement to create a Deposit reserve of 20% of deposits maturing during the financial year 2020-21 before 30th April 2020 shall be allowed to be complied with till 30th June 2020.
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Time limit 30th April of FY itself is unreasonable. Up to 30th September, there should not be such requirement. Company should maintain 20% reserve as on 1st October for deposits maturing in second half of FY and must make arrangement for repayment of deposits by end of month for all deposits maturing in next month.
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- Requirement to invest 15% of debentures maturing during a particular year in specified instruments before 30th April 2020, may be done so before 30th June 2020.
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Similar as for earlier paragraph with necessary modifications.
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- Newly incorporated companies are required to file a declaration for Commencement of Business within 6 months of incorporation. An additional time of 6 more months shall be allowed.
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This was not required, a company commencing and carrying business can definitely comply with requirement of filing declaration – this can be done from home also.
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- Non-compliance of minimum residency in India for a period of at least 182 days by at least one director of every company, under Section 149 of the Companies Act, shall not be treated as a violation.
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The requirement itself seems superfluous. The Board and directors must act properly, residency period in India is not much relevant. Even if one remain 365 / 366 days in India, he can be irresponsible director and citizen.
Superfluous and un-necessary statutory requirements must be deleted from law to make them more meaningful and result oriented.
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- Due to the emerging financial distress faced by most companies on account of the large-scale economic distress caused by COVID 19, it has been decided to raise the threshold of default under section 4 of the IBC 2016 to ₹ 1 crore (from the existing threshold of ₹ 1 lakh). This will by and large prevent triggering of insolvency proceedings against MSMEs. If the current situation continues beyond 30th of April 2020, we may consider suspending section 7, 9 and 10 of the IBC 2016 for a period of 6 months so as to stop companies at large from being forced into insolvency proceedings in such force majeure causes of default.
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Rs. One lakh and Rs. One Crore both are unreasonable limit. A creditor cannot afford proceedings to recover Rs. One lakh. Rs. One crore is very high.
Up to ₹ 50 lakh Arbitration and conciliation proceedings should be allowed as alternate remedy without loss of limitations.
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- Detailed notifications/circulars in this regard shall be issued by the Ministry of Corporate Affairs separately.
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Hopefully complete and clear contents will appear n notifications/ circulars and will not create more confusions.
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